The Authority to Issue Currency: Bitcoin as a Model

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

All praise is due to Allah, Lord of the worlds, and peace and blessings be upon His trustworthy Messenger, and upon those who follow his guidance and adhere to his sunnah until the Day of Judgment. 

In the modern era, money is the lifeblood of economic activity. It is among the most important tools people have devised to ease their dealings with one another, serving as a universally accepted medium of exchange.

Money has passed through many stages since the era of direct barter. In the era of revelation and the consolidation of the Islamic rulings, the circulating currency was gold and silver, with copper coins used for low-value goods. In later periods, paper currency gained ground and became the settled medium of exchange, while gold and silver came to occupy an intermediate place between money and commodity.

The Importance of Money

Money is defined as anything that enjoys general acceptance as a means of payment for goods and services and for the discharge of debts.[1]

Money is central to contemporary economies and to sound commercial dealings among people. Its chief functions are:

1. A universally accepted measure of the value of goods and services.

2. A medium of exchange and means of payment.

3. A store of value.

The Issuance of Currency

Managing currency is a delicate and complex matter that cannot be left to arbitrary interference, for it is among the most vital responsibilities of the state.

Because of the gravity of issuing currency, it was historically carried out only with the knowledge and supervision of walī al-amr (the ruler) or his appointed deputy. On this the four Sunni schools agree, as the following shows.

First: The Ḥanafī School

It is stated in al-Fatāwā al-Hindiyyah (al-ʿĀlamgīriyyah):

“It is disliked to treat copper with chemicals to whiten it and sell it at the rate of silver. Likewise, it is disliked to mint dirhams outside the state mint, even if they are of good quality.”[2]

The dislike here is karāhat taḥrīm (dislike bordering on prohibition). The Ḥanafī texts show that minting is the prerogative of the ruler alone, who has sole authority to issue currency or withdraw it. Imam al-Ḥaṣkafī al-Ḥanafī says: “Among the frequently occurring cases is where a person buys something with circulating coins, and then those coins become obsolete because of a new official minting. What is due as the price is their value on the day of sale, and nothing else, since the judges cannot rule for payment in the obsolete currency because the sovereign has forbidden it.”[3]

Second: The Mālikī School

The Mālikīs confined to the sovereign alone the authority to issue currency, alter its coinage, and make related monetary changes. He alone issues money, determines its official stamp, and replaces it. Imam ʿUlaysh says: “If a person lends or sells using gold dinars, silver dirhams, or copper coins of a known stamp, and the sovereign then changes or replaces the coinage, the borrower or buyer owes only the equivalent of the coinage he received on the day of the contract.”[4]

The Mālikīs also treated tampering with coinage as an offense, since it corrupts public dealings and infringes on the authority of the state. Ibn al-ʿArabī al-Mālikī (may Allah have mercy on him) writes:

“Mālik said: ‘The sovereign shall discipline him for that,’ without restriction and without specifying a fixed threshold. This applies to one who clips or breaks dinars and dirhams, and equally to one who mints coins outside the official state mint, for it is corruption in the land.”[5]

As for the statement reported from Imam Mālik:

“If people were to permit leather among themselves as a currency until it had an official stamp and the status of money, I would dislike for it to be sold for gold and silver on credit,”[6]

This does not mean that the public has independent authority to establish a new currency. Imam Mālik (may Allah be pleased with him) was stressing the gravity of ribā and discouraging it. All the explicit statements of the Mālikī school, including those transmitted from Imam Mālik himself, confine monetary authority to the ruler.

Third: The Shāfiʿī School

Many Shāfiʿī texts indicate that minting by anyone other than the ruler is makrūh. This dislike is not absolute, however. It rises to outright prohibition (taḥrīm) when the ruler expressly bans unauthorized minting, as is the case today.

Imam al-Nawawī states in Rawḍat al-Ṭālibīn: “It is disliked for the subjects to mint dirhams, even if they are of pure metal, because that is the prerogative of the ruler.”[7]

And in al-Majmūʿ:

“Our fellow scholars said: It is disliked for anyone other than the ruler to mint debased coins, for the reasons mentioned regarding the ruler, and because it is an infringement on the ruler’s authority, and because it is hidden and deceives people, unlike minting carried out by the ruler.”[8]

In Ḥāshiyat al-Shirwānī ʿalā al-Tuḥfah:

“It is disliked for anyone other than the ruler to mint dirhams or dinars, and copper fulūs should logically follow for the same underlying reason, without his permission, even if the coins are pure. This is because it is the ruler’s prerogative, it infringes on his authority, and it entitles the ruler to impose discretionary punishment (taʿzīr). Al-Qāḍī said: His punishment for debased coins is more severe, and the deeper analysis supports absolute prohibition, particularly where the ruler forbids it.”[9]

The case for outright prohibition is drawn from these texts as follows:

1. Minting dirhams and dinars is a primary duty of the sovereign, given its profound effect on the livelihood of all people.

2. Minting currency without the sovereign’s authorization is an unlawful infringement on the prerogative of the state, which is prohibited.

3. The Shāfiʿī jurists have expressly stated that minting becomes strictly prohibited if the ruler forbids it. Reserving the creation of currency to the sovereign is also a fundamental premise of modern monetary systems.

Fourth: The Ḥanbalī School

Abū Yaʿlā al-Farrāʾ transmitted from Imam Aḥmad ibn Ḥanbal (may Allah have mercy on him): “It is not permissible to mint dirhams except in the official mint with the sovereign’s authorization, for if people are given leeway in this, they will commit grave transgressions.”[10]

Abū Yaʿlā then comments: “He forbade minting without the sovereign’s authorization because of the infringement on his authority that it involves.”[11]

The classical jurists thus forbade anyone other than the ruler to mint currency even when money was intrinsically valuable gold dinars and silver dirhams. This applies all the more to fiat paper currency, which has no intrinsic value and draws its purchasing power wholly from the authority of the state.

Today, juristic, legal, and political consensus confines the issuance of currency to the state (walī al-amr). Modern legal codes criminalize private issuance of money as counterfeiting, subject to severe penalties. These measures protect public wealth and safeguard the national economy, a point so self-evident that it needs no elaboration.

Both Islamic jurisprudence and modern law therefore establish that issuing currency is an exclusive prerogative of the state and not of individuals or private entities. This applies to every form of money, including official Central Bank Digital Currencies (CBDCs), which are a digital form of a nation’s official fiat currency, issued, regulated, and backed by its central bank at parity with conventional banknotes.[12]

By contrast, modern decentralized cryptocurrencies are issued by private or decentralized parties, often of obscure origin. The best known are Bitcoin and Ethereum, and Bitcoin is the most widely recognized. It is defined as:

“A virtual unit of account with no physical existence, issued by no central bank or monetary authority, capable of being transferred and stored electronically, produced through complex computational algorithms, and traded electronically without official oversight or regulatory supervision.”[13]

Despite the continuing evolution of such digital assets and their wide adoption, they cannot be recognized in the Sharīʿah as legitimate currency (nuqūd), nor given the rulings of gold and silver, for several fundamental juristic reasons:

1. Lack of the essential attributes of money: They lack the core attributes of recognized currency, deriving their perceived value solely from speculative consensus and mutual acceptance.

2. Lack of sovereign issuance and backing: They are not issued by a sovereign state and are not backed by any recognized economic authority or central bank.

3. Extreme volatility and risk (gharar): They are exposed to sudden collapse, potentially falling to zero without warning, which introduces excessive uncertainty (gharar fāḥish).

4. Lack of a stable economic anchor: Their valuation does not follow the established macroeconomic criteria that govern official currencies, but depends entirely on speculative supply and demand, like volatile commodities.

5. Lack of intrinsic or sovereign cover: Having neither gold cover nor state backing, they have no physical reality and exist only as electronic algorithms vulnerable to technical loss, system failure, or cyber disruption. These factors introduce severe gharar and ghabn (sale by deception) that reach the threshold of prohibition.

In conclusion, Bitcoin and similar private cryptocurrencies carry significant Sharīʿah obstacles that justify prohibiting them, whether they are classified as wealth (māl) or otherwise. The authority to issue and regulate currency belongs exclusively to the sovereign state, and no medium claiming monetary status, whether paper or digital, can bypass this essential condition. And Allah Almighty knows best.

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Footnotes and References

1. Al-Janābī, Dr. Hayl. Al-Nuqūd wa’l-Maṣārif wa’l-Naẓariyyah al-Naqdiyyah. Dār Wāʾil, p. 15.

2. A group of scholars. Al-Fatāwā al-Hindiyyah. Dār al-Fikr, 3/215.

3. Ibn ʿĀbidīn. Radd al-Muḥtār ʿalā al-Durr al-Mukhtār. Dār al-Fikr, Beirut, 4/533.

4. ʿUlaysh. Minaḥ al-Jalīl Sharḥ Mukhtaṣar Khalīl. Dār al-Fikr, Beirut, 4/531.

5. Ibn al-ʿArabī al-Mālikī. Aḥkām al-Qurʾān. Dār al-Kutub al-ʿIlmiyyah, 9/88.

6. Imam Mālik. Al-Mudawwanah. Dār al-Kutub al-ʿIlmiyyah, 3/5.

7. Al-Nawawī. Rawḍat al-Ṭālibīn. Al-Maktab al-Islāmī, 2/258.

8. Al-Nawawī. Al-Majmūʿ Sharḥ al-Muhadhdhab. Dār al-Fikr, 6/11.

9. Ibn Ḥajar al-Haytamī. Tuḥfat al-Muḥtāj bi-Sharḥ al-Minhāj (with al-Shirwānī’s Ḥāshiyah). Dār Iḥyāʾ al-Turāth, 3/268.

10. Abū Yaʿlā al-Farrāʾ. Al-Aḥkām al-Sulṭāniyyah. Dār al-Kutub al-ʿIlmiyyah, p. 181.

11. Abū Yaʿlā al-Farrāʾ. Al-Aḥkām al-Sulṭāniyyah, p. 181.

12. See the IMF explainer “Digital Money 101”: https://www.imf.org/en/Publications/fandd/issues/2022/09/digital-money-101-explainer

13. Al-Najjār, Aḥmad Hishām. Al-ʿUmlāt al-Iftirāḍiyyah al-Mushaffarah. Dār al-Nafāʾis, p. 32.